Bulls Target Capstead After Pullback

By David Russell, reporter at OptionMonster

NEW YORK -- The bulls are coming back to Capstead Mortgage ( CMO), which has fallen along with other REITs in the last month.

OptionMonster's trade scanners showed the purchase of almost 5,900 July 12.50 calls in the real-estate investment trust for 25 cents and 30 cents. Previous open interest was just 137 contracts, so new money was definitely being put to work.

These calls lock in the price where shares can be purchased, which can give them potentially significant leverage if the stock rallies. They also limit the amount of money that can be lost in the event of a pullback.

Capstead shares were down almost 1% when the paper hit but then worked higher and closed the session up 0.41% to $12.33. The stock had peaked over $13 in early May.

The company offers a dividend yield of 10% and trades for less than book value, which could be attracting some bargain hunters. Total option volume was 60 times greater than average in the session, with calls outnumbering puts by more than 100 to 1.

Russell has no positions in CMO.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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